Question

Suppose an individual buys 30 bananas when its price is ₹10 per banana. When the price increases to ₹14 per banana, she reduces her demand to 24 bananas. In this case, what will be the price elasticity of demand?

• A. 0.3
• B. 0.2
• C. 0.5
• D. 0.4

Hint:

Unless the question explicitly says “arc/midpoint elasticity”, school/board items usually expect the simple percentage method using the initial values as base.

Answer 1

The Correct Option is C

Step 1: Identify changes.
Initial price \(P_1 = \text{₹}10\), new price \(P_2 = \text{₹}14\) → \(\Delta P = 4\).
Initial quantity \(Q_1 = 30\), new quantity \(Q_2 = 24\) → \(\Delta Q = -6\).
Step 2: Use the percentage (original-base) method (common in school exams).
\[ E_d = \left|\frac{\Delta Q}{Q_1}\right| \Big/ \left|\frac{\Delta P}{P_1}\right| = \frac{6/30}{4/10} = \frac{0.2}{0.4} = 0.5 \] Step 3: Interpretation.
\(E_d = 0.5 < 1\) → demand is inelastic over this price range.
Final Answer: \[ \boxed{E_d = 0.5 \;(\text{inelastic})} \]